It’s not by accident that Julie S. Hurst returned to the trenches to sell long term care insurance as an independent agent after eight years coaching and training advisors on the intricacies of the product. As a coach and trainer, Hurst says she sensed an increasing reluctance among advisors and insurance agents to get involved in LTCI because of the growing complexity of the market and the product itself. But in that reluctance, Hurst, who recently founded her own LTCI-focused company, Wealth Preservation Strategies LLC in Indianapolis, saw opportunity. If more advisors and agents were indeed eschewing LTCI altogether, wouldn’t that leave the door wide open for agents who know the intricacies of the product and the market to flourish?
When it comes to a grasp of LTCI, Hurst says, “consumers often are ahead of their advisors these days.” However, advisors and agents who make the effort to stay at least one step ahead of increasingly savvy clients by keeping close tabs on the dynamic LTCI market are strategically positioned to land clients and sell products some advisors and agents won’t even touch.
So why are some financial professionals foregoing LTCI and the potentially significant income it can generate for a practice?
“In my experience, investment advisors and insurance agents just have an awful time getting comfortable with long term care [insurance],” Hurst explains. “They see so many rate changes, product changes, new product features and companies withdrawing from the market. There is so much turmoil, they say to themselves, ?I’m going to stay away from [LTCI].’ It’s not their bread and butter. They don’t want to be put in a situation with a client where it becomes obvious they don’t really know what they are talking about, because that will reflect poorly on their true areas of expertise.”
Thus come opportunities for people like Hurst who are willing to educate themselves about LTCI and stay abreast of developments in the fast-changing market. But in order for advisors and agents to pounce on those opportunities and build a strong LTCI client base, they first must build and maintain a strong LTCI knowledge base. That entails:
? Developing an approach for addressing and speaking knowledgeably about LTCI with clients, with the goal of uncovering a need where one exists
? Knowing the nuances of product designs and features and having the ability to explain those nuances in terms understandable to the layperson
? Having the ability to match clients with the right kind of policy and features
? Finding out about new products and features before or as soon as they become available
? Knowing market conditions, both locally and nationally, including the cost for various forms of care in the local area
? Understanding the universe of LTCI carriers and how to separate the quality ones from the also-rans
Bottom line: Becoming an LTCI expert – or even just a serviceably knowledgeable agent or advisor – can be a daunting, time-consuming undertaking.
“This is a very complex product and it’s changing all the time,” says veteran LTCI advisor Berry R. Brown. “The devil is certainly in the details with this product.”
But Brown is proof that persistence and hard work in the LTC arena can pay off. Long Term Care Advisors, the independent LTCI agency Brown founded several years ago in Wildwood, Mo., outside St. Louis, is flourishing, he says.
Who do you know?
For newcomers seeking to add LTCI to the product mix, the first logical question is, “Where do I begin?”
Brown and Hurst didn’t need to start at square one in launching their own businesses, having gained valuable seasoning in the LTCI market prior to going independent. But everyone has to start somewhere. And one of the most crucial prerequisites to talking about, recommending and selling LTCI is to learn about the players, the products and the market in which they compete. That requires research and alignment with a good information source – namely a brokerage specializing in LTCI, according to Kevin J. Johnson, CLTC, LTCP, president and co-founder of New York Long Term Care Brokers in Clifton Park, N.Y.
“For the best training and support,” he says, “it’s important to team up with a firm that is focused on long term care [insurance], preferably one that is tied in with multiple carriers.”
The LTCI-focused brokerage should serve as a clearinghouse of product and carrier information. “They’re the ones you rely on to keep you up to date on all the latest and greatest products and features,” Hurst says.
Brown’s brokerage provides him with a steady diet of information, to the point where he often finds out about new products and features before they hit the market. “Not a day goes by that I don’t get six or seven e-mails from my broker, telling me about some new development.”
What do you know?
But that kind of information is only valuable if the advisor has a strong grasp of basic LTCI product chassis and features. An advisor who possesses such a grasp is well equipped to compare policies for clients and help choose ones that best meet their needs. An advisor who lacks such an understanding runs the risk of having his lack of knowledge exposed, leading to lost credibility and perhaps lost clients and lost sales.
“If your knowledge of the product isn’t adequate, you’re probably going to end up selling people policies that are inadequate,” Brown says. “And eventually, those policies are going to be replaced.”
So how does one wrap his head around such a sprawling universe of carriers, products and features? The information adsorption phase of the LTCI 101 course starts with learning about the three basic product chassis, Johnson says. The advisor or agent should know the key distinctions between indemnity, cash, and reimbursement plans and what the differences are between a lifetime benefit plan and plans with pre-established benefit periods (three years, five years, etc.). He also should know which types of clients are generally suited to each kind of plan. If a client is wealthy and wants the utmost in flexibility, for example, the advisor may steer the person to a cash plan. If the client doesn’t have a huge estate or the income to pay the larger premiums associated with a cash plan, a three- or five-year indemnity or reimbursement plan may be the right fit.
Then there are policy design features and add-ons to consider, the volume of which can be enough to make a newcomer’s head spin. It’s useful for the advisor to develop a filter that reliably separates the meaningful from the superfluous, contends Hurst.
“A lot of products have bells and whistles the average client won’t need or use.” She suggests agents and advisors secure contract specimens from carriers and read the fine print in those specimens to really gain a grasp of product nuances. “Every product has its good and its bad points. Sometimes you need to get down to the fine print to find what they are.”
Brown compares the features and riders available with LTCI policies to automotive options. Sometimes all a client wants, needs or can afford is a basic sedan without expensive features; in other cases, a client may want to soup up a model with state-of-the-art features. It’s incumbent on the advisor to develop a breadth of product knowledge that caters to both crowds. According to the experts, that means having a working understanding of such things as inflation protection features, return-of-premium options, whether the policy requires the involvement of a care coordinator, home care options and survivorship riders.
While many LTCI products may look similar in terms of design features and available add-ons, the cost of basic plans and policy options can vary widely from carrier to carrier. Being able to produce cost comparisons and show those comparisons to clients can be invaluable in demonstrating product expertise and closing a sale. Essentially, the advisor needs to know how to structure policies around a target premium and around a person’s budget.
A knowledge of carriers is another requirement for advisors and agents looking to succeed in the world of LTCI. Which carriers’ products will he represent? The company’s debt rating is one issue to consider.
“I look only for A and A+ rated companies,” Hurst says.
“It’s important to stay on top of ratings,” Brown adds, “because they change without notice.”
Another factor is a carrier’s rate history. “We like companies that haven’t historically changed rates,” Johnson says. And as Brown points out, the top carriers in the LTCI industry – companies such as GE, Allianz, John Hancock and MetLife – are ones that never have had a rate increase on an existing book of business.
Besides their strong ratings and long track records of stable rates, these top carriers also offer the benefit of name recognition, Hurst says. “You always want to have that household name, that name brand, when you’re selling long term care [insurance]. It lets clients know there’s somebody strong standing behind you.”
Confronted with dozens of carriers and hundreds of products, it’s up to the individual advisor to determine which to include among his offerings. Veteran LTCI salespeople like Johnson and Brown say the more, the better, as long as the carriers and the products themselves are solid.
“To best serve your clients, I believe you have to carry a whole slew of products,” Brown says.
“Captive agents don’t have anywhere to go when they’re trying to make a sale,” Johnson points out. “All they have to offer is the product from one carrier. But by representing multiple carriers, they give clients access to more options.”
According to Hurst, having an array of options to offer clients is good – up to a point. She suggests that newcomers to the LTCI realm focus initially on two or three carriers, “to get to know those companies and their products. For an individual producer, that makes life much easier. And it still gives you enough options to cover pretty much everything your clients need.”
Armed with insight into products and carriers, now it’s time to move to more local concerns – namely the important task of keeping track of ever-changing care options, facilities and costs in the local market the advisor aims to serve. Gaining that knowledge requires legwork. Hurst recommends periodically canvassing local home health care agencies, nursing homes and assisted living facilities for information on rates, service changes and other relevant details. Brown says he periodically makes unannounced visits to talk to facility administrators and get a feel for a place from those who live there.
Applying what you know
With broker and carrier alliances and a strong knowledge base in place, now it’s time for the LTCI newcomer to develop an approach for cultivating client relationships and actually closing sales. Here, according to our expert panel, are a few necessities to bring to the table to initiate and carry on informed discussions with clients about long term care insurance:
? A personal story that illustrates the need for the product. “People are more likely to trust you if you have been through [a long term care scenario] in some way, shape or form,” Hurst says. An agent who doesn’t have a story from his own life to draw upon should borrow one from another agent, Brown adds.
? Statistics to back up the personal story. In illustrating the need for the product, perhaps the most important stat is the one which says one in two people will need some sort of care.
? The ability to speak with clients honestly and bluntly if necessary. “Show me a guy or a gal who’s really good [at selling LTCI] and I’ll show you someone who’s able to be very frank with clients. You do that by first asking the client’s permission: ?Can I be frank with you?’ Now you have their permission and their attention.”
? A consultative approach. “Long term care is not a subject that you want to be hitting people over the head about,” Johnson says.
? Your own LTCI policy. One of the first questions a client may ask is, “Do you own a policy yourself?” Answering “no” will undermine any argument for the need of the product. An answer in the affirmative tells clients you believe in the product, asserts Hurst. Shopping for your own policy also speeds the LTCI education process, she notes.
? Illustrated cost comparisons between specific policies and features. Clients like to see numbers on paper. Software to help draw these comparisons is available and worth the investment, Hurst says.
? A keen understanding of Medicare and Medicaid coverage levels. “In any discussion of long term care,” notes Brown, “you certainly are going to be fielding a lot of questions about those programs.”
? Familiarity with tax laws that may affect the tax treatment of LTCI investments.
? LTCI-related certifications such as the CLTC designation. “Get some initials after your name,” says Johnson, “to show people you have invested the time to become an expert in the field. Spend the money [to take certification courses].
It’s well worth it.”